How to Go Beyond the Basics: A Step Towards Fraud Risk Prevention

Monday March 13, 2023 comments

Any accounting business and tax advice contained in this podcast is not intended as a thorough in depth analysis of specific issues. Nor is it a substitute for format information. Nor is it sufficient to avoid tax related penalties. 

Hey, welcome to another episode of The Nonprofit Ace Podcast. I'm here to support nonprofit leaders who want to get more comfortable talking about money, who want to have a little bit small, actionable advice. I want to be there in your back pocket to be like, Hey, we know a thing. We got this. 

So this week in our series on the fraud risk we are talking through what are the questions you should be asking. You will see in the show notes. We have a link to the full questionnaire. This week our questions are specifically around staffing and how you can think through if your staffing is opening you up to increased fraud risk. 

So question number one, how do you inform your employees about personal conduct and discipline? So like, how do you set the expectation? So think through what does your onboarding process look like? Are they getting a handbook? Are they needing to sign off that they received and have read the handbook? They need to sign it every year. 

I worked at one organization where every year, if they made a change to the handbook, they were emailing it out and saying we made a change, please sign to say that you received notification of this change. That was their way of saying don't act surprised if we say that you are being let go because you failed to do the thing that we told you, you have to do. 

Another thing to think about is the staff meetings, a lot of times people say we talked about the importance of Ethics and Professional Responsibility conduct during staff meetings. But realistically speaking, I'm sure you have better things to talk about during staff meetings. And you're probably talking about the clients you serve. You're talking about the funding that needs to come in, you're talking about so many other things that this is likely not happening at staff meetings. 

So maybe you need to think about quarterly staff meetings, we are talking through, Hi, we have some concerns or hi, we don't have some concerns. We just want to listen to your concerns. What does staff meeting look like when it comes to personal conduct? And how are you communicating what happens when people don't act appropriately?

So when you want to identify what does appropriate look like? So you want to say hi, people don't just go into the petty cash and take money, you need to submit a request, you need to sign off and the money will be counted out for you. What does that look like? And then what does inappropriate look like? Oh, you took money from the petty cash and you didn't tell anyone until we caught you taking money from the petty cash? What happens now? Do I get a warning? Do I get put on probation? Am I fired? Like what does that look like? You have to make it more tangible. So that again, when you're not in the moment and in the feelings and in the I know this person is a good person, you can be objective. 

Another thing is to think about your personnel screening. So what I have seen is that people don't workout at organizations, either because they're not performing well or they're actually stealing money. Or there's the ability to commit fraud and not steal money, you could actually just be making things up. That is still fraud. You have faked it.

If you're not doing the personnel checks, so, you're not actually checking references. So you're like, oh, that resume looks great. What do their references say? Are you doing background checks? Are you giving out bad references? So really thinking through what's your screening process? And then when people leave? Are you being honest when they are coming up for positions elsewhere? 

Another thing you want to think about is does your staff think they're being treated unfairly? Do they talk about how little they get paid? Do they talk about how much they have to work? If you're putting your employees in a position where they have opportunity, and there's the pressure, and now they're able to rationalize why they should take the money. You're opening yourself up. 

You want to think about do people resent their superiors? So sometimes people steal, not because they feel like oh, my gosh, my job, sometimes it's your supervisor and some people don't want to quit. They're like, I'm staying here, smear them and they will fight it out. So really think about why do people appear to resent their superiors what they do something to sabotage their superiors? 

Another thing is, Are you experiencing a lot of turnover? So this is not just a question of, Wow, what you've lost from high turnover, we now need to retrain all these people. But now think about what does that mean for this position? Are you going to be super grateful when you finally hire someone they say more than 90 days? Are you going to be so grateful that you overlook things? Is this rapid turnover? I mean, meaning that you're not paying enough. And now when someone does come and stay, you've now created an opportunity that they might say, I'm just here so I can steal their money. There are some people who are just, they're out to scam you, okay? 

And then think about what interpersonal relationships look like, I would never tell you to say people can't be friends, they can be. But you also want to make sure that in positions of trust, you're not also creating an environment where people could collude. So collusion is when they're like, I know, they said that, I gotta deposit it, and you are the only person who can record it. So let's work together to steal this money, to collusion, they're working together to steal it. 

And oftentimes, that doesn't happen. I feel like when you look at the movies, I have not seen this in real life. When you look at the movies, they're like, we're never going to talk to each other. They're trying to separate themselves. So if you see sudden shifts in staffing, where people are suddenly not talking, or suddenly there's all this separation, maybe be aware. 

And then finally, think about what ongoing training looks like some of the ways that fraud can be prevented is by training your staff on what does appropriate business practice look like. And so getting them out of their environment and getting them into a new space. Getting them to do professional development with other colleagues where they can see, okay, this is what this should look like and this is what good practices look like. They bring back a new set of eyes to the organization. They give you a new perspective, they bring back best practices for you to implement. And so you never want to slack off on the professional development piece. You want your employees to constantly improve. You want them to feel like this is a place that they can grow at, because that will encourage them to stay. That will encourage them to bring their best. 

So that's it this week for The Nonprofit Ace Podcast. I'm your host, Chyla Graham, and I've been having fun. I would love to hear your feedback. Please leave a review if you're enjoying the podcast. If you recommend it to a friend or follow me on social media. You can find me, I'm most active on LinkedIn. That's Chyla Graham on LinkedIn, and on Instagram @CNRGadvisory. You can also find me on Twitter. You can also find me on Facebook at CNRG Advisory. All right, good bye.


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Fraud Risk Assessment